British Gas cuts gas prices by 10%

Today, British Gas has cut the price of gas on its standard tariff by 10%. Laura Starkey explains how this move could make a difference to you.

It seems like a very short time ago that headlines announcing hefty energy price hikes horrified the nation. Back in July, British Gas announced the biggest ever single increase in the price of gas, hitting customers with a 35% rise which took immediate effect.

By the end of the summer, the rest of Britain’s ‘big six’ energy suppliers had made similar moves.

The result? By the end of 2008, the average household’s energy cost 42% more than it had in 2007 – with yearly bills topping £1,200.

Everything changes?
Today, though, could see financially stretched consumers sighing with relief. British Gas has said it will cut the cost of gas on its standard tariff by 10%.

According to the company, the price reduction will take effect from 19 February. All changes to billing will be made automatically, even for direct debit customers.

In addition, British Gas has introduced new discounts for customers who pay their bills promptly – whether by quarterly cash or cheque, quarterly equal payments or quarterly direct debit.

British Gas says today’s 10% price cut has been made possible by falls in the wholesale cost of energy.

The domino effect
There’s no doubt today’s announcement is good news for British Gas customers. What’s more, it should ultimately benefit even those who don’t buy their gas and electricity from the company.

Thanks to the ‘herd mentality’ of Britain’s major energy suppliers, it may not be long before we see the likes of E.ON, EDF, npower, Scottish Power and Scottish and Southern Energy cutting prices too. Just as a single company’s price increases seemed to prompt a ‘domino effect’ last year, it’s possible today’s price reduction will cause British Gas’s competitors to follow suit.

A big ‘but’
It is worth remembering, however, that despite today’s good news, British Gas customers are still paying significantly more for their energy than they were this time last year.

A 10% cut in gas bills is certainly a step in the right direction – but it’s likely many customers will still struggle to pay for their energy, particularly those pushed into fuel poverty by last year’s unprecedented price rises.

What’s more, today’s cut applies only to the price of gas. The cost of electricity, which also increased in 2008, has not been reduced.

Furthermore, I recently reported my fears that energy companies would leave it as late as possible to cut the cost of their customers’ energy – and it hasn’t escaped my notice that although British Gas has announced its price cut today, it won’t actually take effect for another four weeks.

In my view, this is typical of the way in which many energy companies deal with consumers. While price rises take effect overnight, price cuts take a month to deliver!

In addition, although it’s right for consumers to be glad at the prospect of price falls, I still believe Britain’s energy suppliers are commercial organisations whose main motivation is to make profit. It’s rumoured that British Gas will soon announce record annual earnings. Lowering prices in advance of this news could make the company less vulnerable to a windfall tax – a special duty some campaigners believe energy suppliers should pay, in order to help vulnerable people who’ve been unable to cope with increased fuel bills.

Finally, it’s crucial to remember that in spite of today’s price cut, British Gas’s standard tariff will not automatically be the cheapest option for all consumers. Where you live, how much energy you use and how you choose to pay your bills can have a huge impact on the cost of your gas and electricity – so you could still beat today’s reduction by comparing deals from other providers.

Should I still switch supplier?
Switching your energy supplier is among the quickest, simplest and most effective ways to reduce the cost of your gas and electricity. It takes just a few minutes, but it could save you hundreds of pounds a year – especially if you’ve never switched before.

Of course, as we’re hoping for price cuts from the rest of Britain’s energy companies, you may choose to wait until every supplier has made changes to its tariffs.

It’s difficult to know exactly how long it will take for the market to become a level playing field – but BeatThatQuote.com will keep you up to date with all the news, to help ensure you get the best deal on your gas and electricity.

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